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Financial

A lifestyle report prepared for

Strategies William Ellison and Yvette Ellison

Current Situation

Presented by:
Ross Mackereth

ABC Financial Services


Old Grammar School House
School Gardens
Shrewsbury SY1 2AJ
Phone: 01743 248515
Email: ross@bmcprofiles.com
PLEASE READ CAREFULLY

Important Notes

This report illustrates your financial lifestyle, or your hypothetical cash flow and its effects on your net
worth. This analysis provides only broad, general guidelines, which may be helpful in shaping your
thinking about your planning needs. It can serve as a guide for discussions with your professional
advisers. The quality of this analysis is dependent upon the accuracy of data provided by you.
Calculations contained in this analysis are estimates only.

Actual results may vary substantially from the figures shown. All rates of return are hypothetical and
are not a guarantee of future performance of any asset, including insurance or other financial products.
All inflation rates are estimates provided by you.

This analysis contains very specific computations concerning the value of your assets today. These
computations are based on assumptions you provided concerning the value of your assets today and the
rate at which the assets will appreciate. These assumptions must be carefully reviewed for their
reasonableness. These assumptions are only a "best guess". The actual values, rates of growth, and tax
rates may be significantly different from those illustrated. The actual taxes due may be significantly
greater or smaller than those illustrated. No guarantee can be made regarding values and taxes when
actual appreciation rates and tax rates cannot be known at this time.

For illustrative purposes, many assumptions must be made concerning the sale of properties or the
change of property ownership. These are for illustrative purposes and not to be considered as legal
advice; only your solicitor should provide such advice. No legal or accounting advice is being rendered
either by this report or through any other oral or written communications. Please discuss legal and
accounting matters directly with your advisers in each of those areas. Because your planning concerns
and goals may change in the future, periodically monitoring actual results and making appropriate
adjustments are essential components of your program. Annual updating allows a year of estimated
values to be replaced with actual results and can be very helpful in your determining whether your
plans are on your desired course. Strategies may be proposed during the course of planning, including
the acquisition of insurance and other financial products. When this occurs, additional information
about the specific product (including a key features document, if required) will be provided for your
review.

Version 2.0.0 c. 6.0.0.0


Presented by: Ross Mackereth 14 July, 2009
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1
Confirmation of Facts
The right plan must start with the right facts.

A financial plan must be dynamic; that is, able to change as quickly as your situation changes. Your
plan is based on your facts and assumptions. You should be sure that all of the assumptions and facts
listed here correctly reflect your situation and desires.

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CONFIRMATION OF FACTS

Your Facts
William Ellison Yvette Ellison
Age: 47 Male Born: 23 Jan., 1962 Age: 45 Female Born: 09 Dec., 1963

William and Yvette are married.

Children and Dependents


Name Date of Birth Gender Relationship Dependent of
Peter 23 Aug., 1992 Male Child Yvette, William
Simon 17 Mar., 1995 Male Child Yvette, William

Salaries
Current Inflation
Employer Employee Salary Frequency Rate
Williams Salary William £5,000 Monthly 3.000%
Yvette Salary Yvette £1,250 Monthly 3.000%
Current Bank Accounts, Savings, Deposit
Account Current Interest
Name Owner Balance Balance As Of Rate
Cash Account Yvette, William £0 14 Jul., 2009 0.000% This asset is the
Cash Account
On Line Savings William £34,290 12 Apr., 2009 5.750%
Account
Tax-Efficient Investments
Account Current Interest
Name Owner Balance Balance As Of Rate
William's ISAs William £23,420 23 Jun., 2009 6.000%
Yvette's ISAs Yvette £19,840 21 Jun., 2009 6.000%
Investment Trust
Rates
Current Div. App.
Name/Symbol Owner Value Balance As Of Basis Rate Rate
Yvette's Unit Trust Yvette £26,250 06 Nov., 2008 £18,750 3.000%1 5.000%
Stocks
Rates
Name/ Current Div. App.
Symbol Owner Value Balance As Of Basis Rate Rate
William's Portfolio William £54,360 12 May, 2009 £34,250 4.000%1 4.000%
Investment Bonds
Market Face Growth
Name/Symbol Owner Value Balance As Of Amount Rate
Investment Bond William £50,000 14 Jul., 2009 £27,500 7.000%
Bonds
Name/ Market Face Coupon Maturity
Symbol Owner Value Amount Interest Frequency Date
Government Bond William £25,000 £25,000 5.500% Semiannual 12 Sep., 2016
Retirement Plans
Current Growth Owner Employer
Name Owner Balance Balance As Of Rate Contrib. Contrib.
William £47,350 06 May, 2009 6.000% £250 £250
1
Received in Cash

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CONFIRMATION OF FACTS

Your Facts (Continued)


Retirement Plans (Continued)
Current Growth Owner Employer
Name Owner Balance Balance As Of Rate Contrib. Contrib.
William's Money
Purchase
Yvette's Personal Yvette £26,350 23 Apr., 2009 6.500% £100 £0
Pension
Rental Property
Buy to Let
Current Cost Appreciation
Owner Value Balance As Of Basis Rate
Yvette, William £275,000 12 Apr., 2009 £195,000 3.000%

Rental Monthly Annual Rental


Income Frequency Expenses Expenses Inflation
£650 Monthly £0 £1,000 3.00%

Personal Loan Secured by this Asset


Mortgage Interest
Balance as of Balance Payment Frequency Rate
06 Nov., 2008 £125,000 Interest 5.500%

Residences
Main Residence
Current Cost Appreciation
Owner Value Balance As Of Basis Rate
Yvette, William £450,000 12 May, 2009 £185,000 4.000%

Personal Loan Secured by this Asset


Mortgage Interest
Balance as of Balance Payment Frequency Rate
12 Jun., 2009 £75,000 £720 Monthly 5.500%

Life Insurance-Individual
Face Cash
Name Insured Owner Beneficiary Amount Premium Frequency Value
Life Insurance First To William William £250,000 £125 Monthly £0
Die
Disability Insurance-Individual
Monthly Waiting Benefit
Name Insured Owner Benefit Period Period Premium Frequency
William's William William £2,500 90 Days Age 65 £150 Monthly
Personal PHI
Essential Living Expenses
Percent Percent Percent
Continuing Continuing Continuing
after First after First after First
Description Amount Frequency Death Disability Retirement
Living Expenses £2,000 Monthly 100% 100% 100%
Business Expenses
Description Amount Frequency
Annual Expense for Buy to Let £1,000 Annual

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CONFIRMATION OF FACTS

Your Facts (Continued)


Education Expenses
Percent of
Description Amount Frequency Estimated Aid
University £7,000 Annual 0%
University £7,000 Annual 0%
Debt
Current Interest
Liability Name Owner Balance Balance As Of Rate
Loan for Main Yvette, William £75,000 12 Jun., 2009 5.500%
Residence
Loan for Buy to Let Yvette, William £125,000 06 Nov., 2008 5.500%
Future Purchase
Description Future Owners Anticipated Cost Inflation Start
Retirement Villa Yvette, William £175,000 3.000% Starting when William retires

Distribute Income to Specific Assets


Apply
Description From To Amount Inflation
William's ISA contribution Williams Salary William's ISAs £250 no
Already started and ending when William retires.
Yvette's ISA Contribution Yvette Salary Yvette's ISAs £250 no
Already started and ending when Yvette retires.

Reposition Assets
Apply
Description From To Frequency Amount Inflation
Sell Buy to Let Buy to Let On Line Savings Account n/a n/a n/a
Starting when William retires.

Sweep Transaction
Thres- Min, Apply
Description From To hold Trans. Frequency Amount Inflation
Sweep Lump Sums Cash Account On Line Savings £7,000 £0 Monthly 100% n/a
Account
Already started and ending after the illustration.

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2
Financial Statements
What is your financial situation today? If everything goes as planned, what will it be like in a few
years?

Estimated balance sheets and other financial reports are included in this section.

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FINANCIAL STATEMENTS

Your Current Situation—Balance Sheet View


William Yvette Joint Total
Assets
Liquid Assets
Cash Account £0
On Line Savings Account £34,290 £34,290
William's Portfolio £54,360 £54,360
William's ISAs £23,420 £23,420
Yvette's ISAs £19,840 £19,840
Yvette's Unit Trust £26,250 £26,250
Investment Bond £50,000 £50,000
Retirement Plans
William's Money Purchase £47,350 £47,350
Yvette's Personal Pension £26,350 £26,350
Fixed Assets
Government Bond £25,000 £25,000
Buy to Let £275,000 £275,000
Residence
Main Residence £450,000 £450,000
Total Assets Today £234,420 £72,440 £725,000 £1,031,860

Liabilities
Mortgages
Loan for Main Residence £75,000 £75,000
Loan for Buy to Let £125,000 £125,000
Total Liabilities Today £200,000 £200,000

Net Worth
Your Assets £1,031,860
Less Your Liabilities £200,000

Total Net Worth Today £831,860

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FINANCIAL STATEMENTS

Balance Sheet
Values at End of Year
2009 2010 2011 2012 2013
Assets
Liquid Assets
Cash Account £1,000 £1,000 £1,000 £1,000 £318
On Line Savings Account £35,627 £37,730 £38,439 £39,156 £39,881
William's Portfolio £55,574 £57,719 £59,946 £62,259 £64,662
William's ISAs £25,650 £30,316 £35,270 £40,529 £46,113
Yvette's ISAs £21,962 £26,400 £31,112 £36,115 £41,426
Yvette's Unit Trust £27,048 £27,805 £28,584 £29,385 £30,208
Investment Bond £50,721 £52,224 £53,814 £55,496 £57,274
Retirement Plans
William's Money Purchase £52,320 £62,434 £73,334 £85,070 £97,696
Yvette's Personal Pension £28,002 £30,976 £34,102 £37,388 £40,842
Fixed Assets
Government Bond £25,000 £25,000 £25,000 £25,000 £25,000
Buy to Let £280,473 £288,887 £297,554 £306,480 £315,675
Residence
Main Residence £460,414 £478,831 £497,984 £517,903 £538,619

Totals £1,063,790 £1,119,323 £1,176,140 £1,235,782 £1,297,715

Liabilities

Mortgages
Loan for Main Residence £72,716 £67,957 £62,929 £57,618 £52,007
Loan for Buy to Let £129,066 £129,066 £129,066 £129,066 £129,066

Totals £201,782 £197,023 £191,995 £186,684 £181,073

Net Worth £862,008 £922,300 £984,144 £1,049,098 £1,116,642

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3
Cash Flow Analysis—Funding Your Lifestyle
This analysis of the cash flow process illustrates your needs between now and retirement.

In order to help you clearly see both the opportunities and obstacles within your current financial
situation, this section of the analysis of your cash flow answers the following questions:

• What does "maintaining your lifestyle" mean?


• How does your cash flow process work?
• What incoming cash can you expect to receive?
• What outgoing payments can you expect?
• How will your cash flow handle unexpected payments and fluctuations?
• How will your cash flow affect your assets?
• How will your net worth (the result of your cash flow) change?

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CASH FLOW—YOUR LIFESTYLE PRIOR TO RETIREMENT

Funding Your Lifestyle


This cash flow analysis examines all of the financial items that are part of your lifestyle. It simulates
your typical spending and saving habits in order to determine (a) how you would meet your financial
obligations and (b) what you would have left over for savings or investment.

Maintaining Your Lifestyle


In financial terms, maintaining your lifestyle means being able to meet your expected outgoing
payments so that you can live in the manner to which you are accustomed. Expenses typically increase
with the general cost of living or inflation.

Cash Flow Analysis


Examining your cash flow on a detailed monthly basis helps answer two essential questions: One, will I
have enough money? And, two, if there is a problem, how severe is the shortfall?

While it's not a likely scenario, this section of your analysis assumes that everything goes as planned,
which is helpful in evaluating your present situation. This section assumes that both of you live until
retirement.

The following payments are necessary for you to maintain your lifestyle:
• Basic lifestyle expenses
• Retirement Villa for Yvette and William costing £175,000 (value today) (starting when
William retires)
• Education for Peter
• Education for Simon
• Make payments on all loans

Assumptions
You have defined retirement as the date when William reaches age 55.

General inflation rate for analysis: 3%.

Some assets are essential for your lifestyle. Successfully maintaining your lifestyle means not using any
portion of the assets you designated as "Do Not Use" when defining your priorities.
• Main Residence • Buy to Let
• Retirement Villa

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CASH FLOW—YOUR LIFESTYLE PRIOR TO RETIREMENT

Your Cash Flow Process


Cash flow is a simple, monthly process. You receive money from outside sources and deposit that
money into your bank account. You use that account to pay your expenses and cover your lifestyle
expenses. What you do not spend you save, invest, or use to purchase other assets. If your expenses
exceed your income one month, you take some money out of the savings, sell an asset, or borrow the
funds to pay the expenses. Cash flow analysis is the detailed study of this monthly process.

Your monthly cash flow process involves the following steps:


• Determine your expected incoming cash
• Determine your expected outgoing payments
• Compare incoming and outgoing cash: if outgoing payments exceed incoming cash, use an
asset or borrow money to cover the shortage
• Adjust asset values as necessary

Discretionary Spending
Some of your expenditures fluctuate based on the funds available to you. When your incoming cash
exceeds your outgoing payments, a portion of the excess cash may be used for discretionary spending.
Cash flow analysis helps you identify and understand your discretionary spending, which can improve
your financial situation.

Your Financial Lifestyle


Retirement Villa
Simon Ed.
Peter Ed.
Lifestyle Expenses

Today Retirement 2043

Successfully funded through cash flow


Cash flow was not sufficient without using assets designated as "Do Not Use"

Your cash flow is sufficient.

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CASH FLOW—YOUR LIFESTYLE PRIOR TO RETIREMENT

Assets Used for Cash Flow


Priority and Sources of Funds
You have indicated your priorities and desired uses of certain assets. If there is not sufficient cash flow
to pay your outgoing payments during a particular month, then these assets will be considered in the
order shown below.

The use of some assets would cause a significant change in your lifestyle: such assets are marked "Do
Not Use" or the desired use is indicated
Asset Limit Uses to
Cash Account Unrestricted
On Line Savings Account Unrestricted
William's ISAs Unrestricted
Yvette's ISAs Unrestricted
William's Portfolio Unrestricted
Yvette's Unit Trust Unrestricted
Investment Bond Unrestricted
Government Bond Unrestricted
Main Residence Do Not Use
Buy to Let Do Not Use
William's Money Purchase Retirement
Yvette's Personal Pension Retirement
Retirement Villa Do Not Use

Value of Assets
The cumulative effects of your cash flow change the value of your assets. The effects of cash flow
include the addition of new assets or savings, the use of all or a portion of some assets to pay expenses,
and appreciation or changes in the value of your assets.

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CASH FLOW—YOUR LIFESTYLE PRIOR TO RETIREMENT

Incoming Cash Expected


Expected Income
£120,000

100,000

80,000

60,000

40,000

20,000

0
2014 2019 2024 2029 2034 2039

Salaries Other Income


State Benefits Earnings, Interest, Dividends
Retirement Distributions

The illustration assumes everything goes as anticipated. It does not reflect (a) liquidations or unplanned
withdrawals from your assets or (b) new loan proceeds that may be necessary during any month that
expenses exceed income.

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CASH FLOW—YOUR LIFESTYLE PRIOR TO RETIREMENT

Incoming Cash Expected


Incoming Cash Flow
Earnings Retirement Total
Other1 State2 (Cash, Plan Expected
Year Salary Income Benefits Dividends) Distributions Income
2009 £37,500 £3,900 £0 £2,851 £0 £44,251
2010 77,250 10,483 0 5,781 0 93,514
2011 79,568 8,275 0 5,889 0 93,732
2012 81,955 8,523 0 6,002 0 96,479
2013 84,413 8,779 0 6,118 0 99,310
2014 86,946 9,042 0 6,239 0 102,227
2015 89,554 9,314 0 6,364 0 105,231
2016 92,241 9,593 0 6,493 0 108,327
R 2017 19,002 823 0 5,253 41,668 66,746
2018 17,941 0 0 5,392 21,546 44,879
2019 0 0 0 4,161 8,639 12,801
2020 0 0 0 4,311 8,639 12,950
2021 0 0 0 4,466 8,639 13,105
2022 0 0 0 4,627 8,639 13,266
2023 0 0 0 4,794 8,639 13,433
2024 0 0 0 4,966 8,639 13,606
2025 0 0 0 5,145 8,639 13,785
2026 0 0 0 5,331 8,639 13,970
2027 0 0 0 5,512 8,639 14,151
2028 0 0 11,468 5,161 8,639 25,268
2029 0 0 12,715 4,526 8,639 25,880
2030 0 0 23,328 4,086 8,639 36,053
2031 0 0 24,028 3,784 8,639 36,452
2032 0 0 24,749 3,432 8,639 36,820
2033 0 0 25,491 3,025 8,639 37,156
2034 0 0 26,256 2,559 8,639 37,454
2035 0 0 27,044 2,028 8,639 37,711
2036 0 0 27,855 1,488 8,639 37,982
2037 0 0 28,691 996 8,639 38,326
2038 0 0 29,551 458 8,639 38,648
2039 0 0 30,438 23 8,639 39,100
2040 0 0 31,351 0 8,639 39,990
2041 0 0 32,292 0 8,639 40,931
2042 0 0 33,260 0 8,639 41,900
2043 0 0 34,258 0 8,639 42,897

The illustration assumes everything goes as anticipated. It does not reflect (a) liquidations or unplanned
withdrawals from your assets or (b) new loan proceeds that may be necessary during any month that
expenses exceed income.

1
2
Other Income includes any estimated tax refunds for the prior year.
State retirement benefits start at age listed in Planning Assumptions.
R-Retirement assumed to begin in this year.

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CASH FLOW—YOUR LIFESTYLE PRIOR TO RETIREMENT

Expected Outgoing Payments


Expected Outgoing Payments
£280,000

240,000

200,000

160,000

120,000

80,000

40,000

0
2014 2019 2024 2029 2034 2039

Basic Living Expenses Education & Specific Needs Funding


Loan Payments Retirement Plan Contributions
Discretionary Spending Total Additional Income Tax

Outgoing payments begin with compulsory expenses (such as taxation) and continue through your
discretionary spending.

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CASH FLOW—YOUR LIFESTYLE PRIOR TO RETIREMENT

Expected Outgoing Payments


Outgoing Payments
Education & Retirement Discre- Tax Payments Total
Basic Specific Loan Plan tionary and1 Outgoing
Year Expenses Needs Payments Contributions Spending Deductions Payments
2009 £14,650 £0 £7,869 £2,100 £4,391 £11,241 £40,251
2010 29,050 3,092 15,739 4,290 12,187 23,156 87,514
2011 29,822 7,865 15,739 4,383 3,909 27,455 89,173
2012 30,618 8,337 15,739 4,478 4,519 28,261 91,953
2013 31,438 12,520 15,739 4,577 2,136 29,089 95,497
2014 32,282 14,832 15,739 4,678 2,299 29,942 99,771
2015 33,151 9,930 15,739 4,782 6,385 30,772 100,759
2016 34,047 10,525 15,739 4,890 12,237 31,659 109,096
R 2017 253,587 6,508 9,232 1,200 0 7,784 278,311
2018 32,815 0 8,640 1,100 0 27,546 70,100
2019 33,754 0 8,640 0 0 831 43,225
2020 34,722 0 8,640 0 0 756 44,118
2021 35,718 0 2,825 0 0 481 39,024
2022 36,745 0 0 0 0 459 37,204
2023 37,802 0 0 0 0 468 38,270
2024 38,891 0 0 0 0 479 39,371
2025 40,013 0 0 0 0 497 40,510
2026 41,168 0 0 0 0 515 41,683
2027 42,358 0 0 0 0 533 42,891
2028 43,584 0 0 0 0 551 44,135
2029 44,097 0 0 0 0 1,765 45,862
2030 44,647 0 0 0 0 1,739 46,386
2031 45,986 0 0 0 0 2,125 48,111
2032 47,366 0 0 0 0 2,094 49,460
2033 48,787 0 0 0 0 2,058 50,845
2034 50,251 0 0 0 0 2,016 52,267
2035 51,758 0 0 0 0 1,969 53,727
2036 53,311 0 0 0 0 1,915 55,226
2037 54,910 0 0 0 0 1,842 56,753
2038 56,558 0 0 0 0 1,739 58,297
2039 58,254 0 0 0 0 1,626 59,880
2040 60,002 0 0 0 0 1,533 61,535
2041 61,802 0 0 0 0 1,523 63,325
2042 63,656 0 0 0 0 1,517 65,173
2043 65,566 0 0 0 0 1,510 67,076

Outgoing payments begin with compulsory expenses (such as taxation) and continue through your
discretionary spending.

1
All PAYE tax deductions plus additional tax payments (other income and capital gains tax). Refunds are shown as other
income in the year received.
R-Retirement assumed to begin in this year.

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CASH FLOW—YOUR LIFESTYLE PRIOR TO RETIREMENT

Net Adjustments for Cash Flow


Net Adjustments for Year Based on Monthly Cash Flow
Net Assets
Expected New Loan Used for Annual Total Outgoing
Year Income Proceeds Cash Flow Shortfall Payments
2009 £44,251 £0 £0 --- £40,251
2010 93,514 0 0 --- 87,514
2011 93,732 0 0 --- 89,173
2012 96,479 0 0 --- 91,953
2013 99,310 0 0 --- 95,497
2014 102,227 0 0 --- 99,771
2015 105,231 0 0 --- 100,759
2016 108,327 0 769 --- 109,096
R 2017 66,746 0 211,565 --- 278,311
2018 44,879 0 25,222 --- 70,100
2019 12,801 0 30,424 --- 43,225
2020 12,950 0 31,167 --- 44,118
2021 13,105 0 25,919 --- 39,024
2022 13,266 0 23,938 --- 37,204
2023 13,433 0 24,837 --- 38,270
2024 13,606 0 25,765 --- 39,371
2025 13,785 0 26,725 --- 40,510
2026 13,970 0 27,713 --- 41,683
2027 14,151 0 28,740 --- 42,891
2028 25,268 0 18,867 --- 44,135
2029 25,880 0 19,982 --- 45,862
2030 36,053 0 10,334 --- 46,386
2031 36,452 0 11,660 --- 48,111
2032 36,820 0 12,640 --- 49,460
2033 37,156 0 13,689 --- 50,845
2034 37,454 0 14,813 --- 52,267
2035 37,711 0 16,016 --- 53,727
2036 37,982 0 17,244 --- 55,226
2037 38,326 0 18,427 --- 56,753
2038 38,648 0 19,649 --- 58,297
2039 39,100 0 20,780 --- 59,880
2040 39,990 0 21,545 --- 61,535
2041 40,931 0 22,394 --- 63,325
2042 41,900 0 23,273 --- 65,173
2043 42,897 0 24,179 --- 67,076

R-Retirement assumed to begin in this year.

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CASH FLOW—YOUR LIFESTYLE PRIOR TO RETIREMENT

Will Cash Flow Provide Needed Outgoing


Payments?
By combining the information from the previous graphs, it is easy to see how your cash flow process
works. Expected income is shown on top of the total outgoing payments. Any portion of payments
remaining is paid by the cash flow process—using assets you have designated. When the cash flow
process cannot provide the needed payments without using assets you designated as “Do Not Use,”
then you have failure with the needed amount shown as a shortfall.

Summary of Cash Flow Process


£280,000

240,000

200,000

160,000

120,000

80,000

40,000

0
2014 2019 2024 2029 2034 2039

Total Expected Income Net Outgoing Payments from Cash Flow


Lifestyle Shortfall for Year

Expected Income—–the sum of all income items before the cash flow process is applied to use any
assets or new loans to meet outgoing payments
Outgoing Payments from Cash Flow Process—the portion of outgoing payments that were required
to be paid from using various assets or new loans
Shortfall—the amount needed in a year to pay all desired outgoing payments to maintain your lifestyle,
but without using any assets you designated as “Do Not Use”

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CASH FLOW—YOUR LIFESTYLE PRIOR TO RETIREMENT

Cash Flow & Net Worth


Cash Flow & Net Worth
Net Paid from End of End of Cumulative
Expected Total Outgoing Cash Flow1 Year2 Year Annual
Year Income Payments Process Assets Liabilities Shortfall Net Worth
2009 £44,251 £40,251 £0 £1,063,790 £201,782 --- £862,008
2010 93,514 87,514 0 1,119,323 197,023 --- 922,300
2011 93,732 89,173 0 1,176,140 191,995 --- 984,144
2012 96,479 91,953 0 1,235,782 186,684 --- 1,049,098
2013 99,310 95,497 0 1,297,715 181,073 --- 1,116,642
2014 102,227 99,771 0 1,361,331 175,145 --- 1,186,186
2015 105,231 100,759 0 1,430,241 168,883 --- 1,261,358
2016 108,327 109,096 769 1,497,684 162,268 --- 1,335,415
R 2017 66,746 278,311 211,565 1,293,348 26,214 --- 1,267,134
2018 44,879 70,100 25,222 1,262,789 18,831 --- 1,243,958
2019 12,801 43,225 30,424 1,286,645 11,032 --- 1,275,613
2020 12,950 44,118 31,167 1,310,379 2,793 --- 1,307,585
2021 13,105 39,024 25,919 1,339,997 0 --- 1,339,997
2022 13,266 37,204 23,938 1,372,569 0 --- 1,372,569
2023 13,433 38,270 24,837 1,405,220 0 --- 1,405,220
2024 13,606 39,371 25,765 1,437,885 0 --- 1,437,885
2025 13,785 40,510 26,725 1,470,489 0 --- 1,470,489
2026 13,970 41,683 27,713 1,502,958 0 --- 1,502,958
2027 14,151 42,891 28,740 1,535,202 0 --- 1,535,202
2028 25,268 44,135 18,867 1,578,681 0 --- 1,578,681
2029 25,880 45,862 19,982 1,622,839 0 --- 1,622,839
2030 36,053 46,386 10,334 1,678,732 0 --- 1,678,732
2031 36,452 48,111 11,660 1,735,624 0 --- 1,735,624
2032 36,820 49,460 12,640 1,793,926 0 --- 1,793,926
2033 37,156 50,845 13,689 1,853,632 0 --- 1,853,632
2034 37,454 52,267 14,813 1,914,732 0 --- 1,914,732
2035 37,711 53,727 16,016 1,977,213 0 --- 1,977,213
2036 37,982 55,226 17,244 2,041,177 0 --- 2,041,177
2037 38,326 56,753 18,427 2,106,868 0 --- 2,106,868
2038 38,648 58,297 19,649 2,174,344 0 --- 2,174,344
2039 39,100 59,880 20,780 2,243,651 0 --- 2,243,651
2040 39,990 61,535 21,545 2,314,811 0 --- 2,314,811
2041 40,931 63,325 22,394 2,387,764 0 --- 2,387,764
2042 41,900 65,173 23,273 2,462,526 0 --- 2,462,526
2043 42,897 67,076 24,179 2,539,114 0 --- 2,539,114

Cash Flow Affects the Value of Assets


When Outgoing Payments exceed the Expected Income, existing assets must be used. If Expected
Income exceeds Outgoing Payments then the surplus creates additional assets. These cash flow
transactions are reflected in your assets. Net Worth is the difference in Assets and Liabilities.

1
2
Net change in existing assets due to appreciation, depreciation, reinvested earnings, and other changes.
Assets equal total income less outgoing payments plus net effects of cash flow plus existing assets.
R-Retirement assumed to begin in this year.

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CASH FLOW—YOUR LIFESTYLE PRIOR TO RETIREMENT

Net Worth
Net Worth Equals Assets Less Liabilities
• Net worth reflects the ongoing cash flow process
• Examining cash flow focuses on the monthly finances
• Examining net worth focuses on the long-term overall effects

Net Worth
£2,800,000

2,400,000

2,000,000

1,600,000

1,200,000

800,000

400,000

0
2014 2019 2024 2029 2034 2039

Net Worth

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CASH FLOW—YOUR LIFESTYLE PRIOR TO RETIREMENT

Conclusions
Based on the expenses that you specified, your present plans would be sufficient to maintain your
lifestyle. The following options may help you optimize your cash flow:

Reduce Expenses
• Determine whether you can comfortably reduce your expenses by reexamining each individual
expense
• Consider reducing your discretionary spending and increasing your savings
• Are you claiming all the tax allowances to which you are entitled? Invest in one of the many
inexpensive tax guides at your local book shop before you complete your next tax return.

Refinance Loans

• You may reduce your monthly expenses by (a) refinancing a loan to obtain a lower rate or (b)
extending the terms of a loan
• Consider the fees and any points associated with individual loans when comparing payments

Pay Off Loans

• Reduce your monthly expenses by selling a slow growing asset and using the proceeds to pay
off your loans

Downsize
• Sell your current home and buy a home or apartment of lesser value
• Reduce or eliminate your mortgage payment
• Reduce other monthly expenses, such as home maintenance, insurance, and property taxes

Change Some Investments

• Examine your investment portfolio and consider options that might increase your yields
• Consider differences in risk, returns, and your time horizons before making changes
• Consider all taxation, fees and other important investment characteristics

Reexamine Your Sensitivity to Life's Major Uncertainties

• Is it possible that you will outlive your wealth during retirement?


• How would the unexpected death of you or your spouse affect the lifestyle of the survivors?
• What would happen to your plans if you or your spouse became disabled?
• Are you financially prepared for an extended nursing home stay during retirement?

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4
Probabilities—Planning
for Uncertainties
Life's uncertainties may prevent the success of your planning.

There are a number of factors that you cannot directly control, yet these uncertainties must be
considered, especially the uncertainty of economic conditions. Although historical averages of
investment yields can be good indicators of a plan's success over time and represent many years, some
years will be better and some years will not be as good. Will your plan still work if several bad years
are experienced early? What if several bad years precede your expected retirement? Could your plan
succeed if several bad years occurred during your retirement? Is your plan likely to be successful
regardless of the changes and uncertainties of the economic conditions?

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PROBABILITIES—PLANNING FOR UNCERTAINTIES

Maintaining Your Lifestyle


Success means not running out of money or using any of your assets you designated as "Do Not Use".
If your plan runs out of money, it is considered a cash flow failure. In addition to basic lifestyle
expenses, your plan considers your other specific needs. Your plan has a 69% chance of running out of
money based on 1000 simulations for the next 35 years. The Cash Flow Analysis section shows details
to help with further planning.

What Are The Chances Of Running Out Of Money?

Out of Cash Sufficient Cash


1000 Simulations
31% did not run out of money 69% 31%

Specific Needs Considered


Success for a specific need means that its funding was completed prior to running out of money. The
funding of these specific needs is considered in the overall success of maintaining your lifestyle. The
Cash Flow Analysis section and the Education Funding Section show details to help with further
planning.

When Will You Run Out of Money?

Successful Simulations through Age


100%

80

60

40

20

0
54 61 68 75

Cumulative Successes Based on 1000 Simulations

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PROBABILITIES—PLANNING FOR UNCERTAINTIES

Expected Values
Financial events seldom, if ever go exactly as planned due to a number of uncertainties beyond your
control. By using the probabilities of these uncertainties and making numerous simulations of your
facts, it is possible to determine likely results and a range of those results. This provides you with a
more realistic expectation.

Uncertainties Considered
• Changes in the economy such as ups and downs of the stock market
• Cost of living changes
• Education inflation rate

1,000 Simulations
Your information was calculated 1,000 times exposing each year to the probability of these
uncertainties, and the affects on the continuing calculations. As values varied, significant effects on
cash flow could result. Each simulation was a realistic, possible result of your financial situation.
Analysis of these simulations shows your expected results within a likely range.

Average Net Worth and Expected Range1


£12,000,000

10,000,000

8,000,000

6,000,000

4,000,000

2,000,000

0
54 61 68 75

Low Net Worth Average Net Worth High Net Worth

The average net worth of £2,326,174 based on 1000 simulations has a relative error of 4.08%.2

1
For the 1000 simulations, 70% of the results were between the High Net Worth and the Low Net Worth. Eighty-five percent of
2
the results were above the Low Net Worth.
Average result equals the means of all results; high net worth result is the 85th percentile (85% of the results were less than
this value); and low net worth is the 15th percentile (15% of the results were less than this value). Supported by standard
statistical theory, the relative error indicates a probability of greater than 99% that these values represent the true average
result. Results cannot be guaranteed but are statistical measures applied to the results of a large number of simulations. The
relative error of the average net worth for an event relates to the number of simulations in which the event occurs. Increasing
the number of simulations will reduce the relative error.

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